China’s QDII fund size hits record as investors rush for overseas assets

China's QDII fund size hits record as investors rush for overseas assets
FILE PHOTO: Investors sit in front of a board showing stock information at a brokerage house on the first day of trade in China since the Lunar New Year, in Hangzhou, Zhejiang province, China February 3, 2020. China Daily via REUTERS/File

HONG KONG : The size of China’s overseas investment mutual funds rose significantly in July, crossing 400 billion yuan ($54.90 billion) for the first time, reflecting local investors’ sizzling demand for foreign equities and bonds.

Total assets under management (AUM) of mutual funds under the qualified domestic institutional investor (QDII) programme, jumped 12 per cent in July from the previous month to a record 401.3 billion yuan, data from the Asset Management Association of China (AMAC) showed on Friday.

That marked the fastest growth since November 2022.

Domestic investors’ appetite for overseas assets has been growing strongly since late last year, analysts said, as China’s A-share performance disappoints, while stock markets in the U.S. and other major markets had done exceptionally well.

The QDII program, first launched in 2006, remains the largest outbound investment channel for Chinese investors. The scheme is capped by a quota set by the State Administration of Foreign Exchange (SAFE).

“People have been forced to look for additional returns elsewhere,” said Howhow Zhang, a partner at consultancy EY Parthenon.

The yuan’s depreciation against the U.S. dollar has also given a boost for investing abroad, he said.

Chinese equities have sharply lagged global peers this year as the country’s economic rebound missed expectations and western capital turned away from the world’s second- largest economy amid heightened geopolitical tensions.

China’s blue chip CSI 300 Index has lost 4 per cent so far this year, in a sharp contrast to a 14 per cent gain of S&P 500. The yuan has dropped more than 5 per cent against the surging dollar during the period.

Market participants say ETFs tracking Nasdaq and S&P 500, as well as low volatility income strategies, such as global bonds, are among the most popular QDII products.

In response to a rising demand for overseas investment allocation, SAFE has been accelerating granting new QDII quotas to financial institutions this year.

Between January and July this year, banks and asset managers already obtained a total of US$5.8 billion new quota, outpacing all of 2022, according to calculations by Reuters based on SAFE data. HSBC China, China Merchants Bank and JPMorgan Chase Bank (China) are among the latest batch receiving new quota.

($1 = 7.2862 Chinese yuan renminbi)



Source: Reuters